9_18 Bankruptcy Notes
Content
Civil Practive Law and Rules- NY
Problem 4.1 under NY exemptions
5205
- Can sweep computers in under A5
- Law books- tools of trade section but needs to be below $3K
- Moped/ mGA
- 5205 5 i- insurance
** most important exemption is alternative cash exemption—most don’t have
stuff or houses but can use the cash exemption to survive the bankruptcy
4.2 in all states life insurance policies are exempt! Can hide your money there
4.3- Lin tran
- forget about equity b/c downpayment doesn’t matter…look at what property is
worth
- judgment creditor- placed 2nd lien for 25K
- how much will judgemtn creditor get?
- if she voluntarily sells it and real estate guy charged 6% then secured creditor
would get 135K and the debtor would get the next 30K ( 165K) which would leave
over 4 or 5K for unsecured creditors
- property is worth 180K and she only has $130K exemption…why is she able to
keep it—exemptions don’t beat consensual liens..it looks at debtors interests above
the lien. Order of money distribution: Mortgage lender, debtor’s interest, unsecured
…if sold at auction by sheriff will debtor get- homestead exemption (yes).. but first
money goes to mortgage holder, nothing goes to debtor or the unsecured person…
judgment creditor can’t grab it
-- mortgage gets paid down the mortgage lender still gets paid
Priority: costs of sale, first lien holder (in order of priority), followed by debtors
exemption, judgment creditors
- Judgment creditor is residual claimant on left over asset
General point: want person with skin in the game to make decisions….if company is
solvent junior most interest holder (shareholder) is losing so they should make
decision
In re Sumerell- issue: have 21K worth of stuff and Q is if it’s sold in bankruptcy
how much will creditor actually get?
- Court had to figure out what the value was-- 2 diff appraisers show up
- 20 cents on dollar OR 19K
Court needed to decide what the right valuation is for stuff!
Court uses fair market value—b/c debtor ends up keeping the stuff
Different ways to calculate the exemptions:-- CHECK WHO IS GETTING THE STUFF to
properly valuate the items at hand
By what the value is to the debtor
Byw aht the fair market value is
- By what the value is
- 506A of the bankruptcy code:
o The valuation should be calculated byu the disposition of the property
If the debtor is keeping it , you find the value to the debtor
If the creditor is getting it—what the value is to the creditor
Pg. 101- for certain kinds of liens
- Consensual liens beat exemptions
- 522 F if a debtor grants non possessory security interest in property that are
usually exempt under state law and it’s not to get money to buy stuff but to
cover other debts then that lien will be invalidated to extent that it impairs
exemption
- Can’t use stuff as collateral
o Bankruptcy code paternalism—prevents certain things from being used
as collateral/ hoc
Asset protection trust
- Domestic
- Foreign- take money and put it in a bank account in cayman/ cook islands
Questions- 5.1
- No one place where guy has had domicile in 730 days
- Florida exemptions should apply—maybe unlimited homestead exemption
o Within 2 years someone will move from a small exmeption state to a
large to buy a large house
- Wyoming – may not be able to apply property if its not in the actual state
o If directed to a state where the person will get no exemptions you can
elect federal exemptions
5.2- tenancy by the entirety—married couple owns the property – 522 b3B—need to be
creditors of both husband and wife…in case these are only the husband’s creditors
- not an exemption but allows debtors to insulate certain property from creditors
5.3
- 522p1 – value of homestead has increased by more than 146K in last 1200 days (4
years) then homestead increase is limited to 125K… million they paid is fine but
the running up of 3 mill they only get to keep 140K
Problem 4.1 under NY exemptions
5205
- Can sweep computers in under A5
- Law books- tools of trade section but needs to be below $3K
- Moped/ mGA
- 5205 5 i- insurance
** most important exemption is alternative cash exemption—most don’t have
stuff or houses but can use the cash exemption to survive the bankruptcy
4.2 in all states life insurance policies are exempt! Can hide your money there
4.3- Lin tran
- forget about equity b/c downpayment doesn’t matter…look at what property is
worth
- judgment creditor- placed 2nd lien for 25K
- how much will judgemtn creditor get?
- if she voluntarily sells it and real estate guy charged 6% then secured creditor
would get 135K and the debtor would get the next 30K ( 165K) which would leave
over 4 or 5K for unsecured creditors
- property is worth 180K and she only has $130K exemption…why is she able to
keep it—exemptions don’t beat consensual liens..it looks at debtors interests above
the lien. Order of money distribution: Mortgage lender, debtor’s interest, unsecured
…if sold at auction by sheriff will debtor get- homestead exemption (yes).. but first
money goes to mortgage holder, nothing goes to debtor or the unsecured person…
judgment creditor can’t grab it
-- mortgage gets paid down the mortgage lender still gets paid
Priority: costs of sale, first lien holder (in order of priority), followed by debtors
exemption, judgment creditors
- Judgment creditor is residual claimant on left over asset
General point: want person with skin in the game to make decisions….if company is
solvent junior most interest holder (shareholder) is losing so they should make
decision
In re Sumerell- issue: have 21K worth of stuff and Q is if it’s sold in bankruptcy
how much will creditor actually get?
- Court had to figure out what the value was-- 2 diff appraisers show up
- 20 cents on dollar OR 19K
Court needed to decide what the right valuation is for stuff!
Court uses fair market value—b/c debtor ends up keeping the stuff
Different ways to calculate the exemptions:-- CHECK WHO IS GETTING THE STUFF to
properly valuate the items at hand
By what the value is to the debtor
Byw aht the fair market value is
- By what the value is
- 506A of the bankruptcy code:
o The valuation should be calculated byu the disposition of the property
If the debtor is keeping it , you find the value to the debtor
If the creditor is getting it—what the value is to the creditor
Pg. 101- for certain kinds of liens
- Consensual liens beat exemptions
- 522 F if a debtor grants non possessory security interest in property that are
usually exempt under state law and it’s not to get money to buy stuff but to
cover other debts then that lien will be invalidated to extent that it impairs
exemption
- Can’t use stuff as collateral
o Bankruptcy code paternalism—prevents certain things from being used
as collateral/ hoc
Asset protection trust
- Domestic
- Foreign- take money and put it in a bank account in cayman/ cook islands
Questions- 5.1
- No one place where guy has had domicile in 730 days
- Florida exemptions should apply—maybe unlimited homestead exemption
o Within 2 years someone will move from a small exmeption state to a
large to buy a large house
- Wyoming – may not be able to apply property if its not in the actual state
o If directed to a state where the person will get no exemptions you can
elect federal exemptions
5.2- tenancy by the entirety—married couple owns the property – 522 b3B—need to be
creditors of both husband and wife…in case these are only the husband’s creditors
- not an exemption but allows debtors to insulate certain property from creditors
5.3
- 522p1 – value of homestead has increased by more than 146K in last 1200 days (4
years) then homestead increase is limited to 125K… million they paid is fine but
the running up of 3 mill they only get to keep 140K
